Posts Tagged ‘CMI’

In every single individual consumer bankruptcy case, the debtor’s Current Monthly Income (“CMI”) must be calculated. So just what is a debtor’s Current Monthly Income? Well, its not what the debtor’s income currently is….I’ll tell you that!

It’s actually the quotient of the aggregate of income a debtor earns in the 6 calendar months prior to the month in which a debtor files his Bankruptcy Petition, divided by 6. In other words, its the average of the gross income the debtor receives from all sources in the 6 months prior to filing a bankruptcy petition.

Current Monthly Income is a term defined by 11 USC 101(10A):

(A) means the average monthly income from all sources that the debtor receives (or in a joint case the debtor and the debtor’s spouse receive) without regard to whether such income is taxable income, derived during the 6-month period ending on—

(i) the last day of the calendar month immediately preceding the date of the commencement of the case if the debtor files the schedule of current income required by section 521 (a)(1)(B)(ii); or

(ii) the date on which current income is determined by the court for purposes of this title if the debtor does not file the schedule of current income required by section 521(a)(1)(B)(ii); and

(B) includes any amount paid by any entity other than the debtor (or in a joint case the debtor and the debtor’s spouse), on a regular basis for the household expenses of the debtor or the debtor’s dependents (and in a joint case the debtor’s spouse if not otherwise a dependent), but excludes benefits received under the Social Security Act, payments to victims of war crimes or crimes against humanity on account of their status as victims of such crimes, and payments to victims of international terrorism (as defined in section 2331 of title 18) or domestic terrorism (as defined in section 2331 of title 18) on account of their status as victims of such terrorism.

For example, say the debtor files his petition on July 1. He will need to add up all the gross income he received from January 1 – June 30, then divide it by 6. This will provide his CMI. If he files on July 31, he’ll need to add up that income during the same time period. But should he file on August 1, the CMI period shifts to February 1 – July 31.

The formula requires the debtor include in the calculation income from all sources but for three exceptions:

1. The debtor does not include income received by way of the Social Security act – thus Social Security Income (SSI), Social Security Assistance (SSA), and Social Security Disability Income (SSDI) are not included;

2. Income the debtor receives on account of being a victim of war crimes or crimes against humanity, what I call “refugee income;” and

3. Income the debtor receives on account of being a victim of foreign or domestic terrorism

Now the calculation is rather simple for debtors who solely earn wages or other sources of steady and regular income (like disability or retirement income). However the calculation can get tricky if the debtor is self-employed. Even more so if the debtor derives income from operating an incorporated entity like an LLC or an Inc. I’ll write about those cases later.